The thesis partakes an important role in making an addition to the effort of understanding the differences in management control system in PPP infrastructure projects specific to roads. With Norway planning to deliver three more road projects under PPP agreements makes the topic to the timely and relevant. Various types of controls used in partnerships among public and private entities in executing and implementing successful infrastructure development project has been discussed with comparative analysis of the three Norwegian road projects with the M7 Motorway of Australia. The problem statement of the thesis focused on the challenges with the application of management control mechanisms in the PPP model. This was brought about by comparison of different contextual challenges of the PPP projects in Norway and Australia. One of the finding was suggestive that same type of control cannot be considered to be effective when the private party has roles in varying degree in the execution of project.
The finding that the appropriate way to design a management control system was by identifying risk areas first and then designing appropriate controls to address them was evident through the research process. Primarily, the learning about cybernetics control being found to be inclined towards subjective criteria was also gathered.
Cybernetic control in both the PPP models were not well defined except for a few criteria for measuring performance. A set of well-defined parameters for assessment and use of modern hybrid measurement system were absent challenging the proper evaluation mechanism of the projects. In terms of budget, even though a fixed budget was predetermined efforts to check their compliance were not evident in the project.
In Norway, the building cost was financed with loans and the interests on these loans made the project more expensive. Compensation control on the delivery of the entity under consideration lays out a fact that though this measure of control is important to ensure the quickness in the project delivery, government could still have used its good credit rating to provide private loans, with interest as low as possible; thus, directly affecting on making the project less expensive. With respect to financial measures of control, the need for Norway to consider using PPP for financial reasons as well than
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just gaining efficiency and value for money was generated. After figuring that the financial measures to assess the performance of the private entity was not found in records, a conclusion was also generated. It was that some form of financial aspect for judgement could be introduced as another control mechanism over private entity. In Norwegian project, the delivering entity suffered considerable cost overruns. Even though this did not affect the final cost for the procuring entity, a continuous cost monitoring seems to be needed in order to avoid such circumstances. The budgetary control in the procurement phase could provide more market confidence in the project, making it attractive to bidders and potential financiers.
All in all, the compensation mechanism applied in Norwegian PPP model had minimal control over private party as there was surety of financial lease capital payment despite the inability to meet maintenance and operational specification. The negative reward system that penalized private entity for non-compliance with the pre-set standards showed its success till date in controlling the performance of the private entity. There was the probability of the compensation mechanism in Norway to make the private party passive as consistent payment was made throughout contract period with no added benefits. The negative reward system would be able to make them perform as per the requirement but would not motivate them to go beyond the desired standards. This issue in the compensation and reward control was a limiting factor in Norwegian PPP. In Australian project, the contrast was seen with reward and compensation mechanism applied by Australian PPP in M7 Motorway having a significantly positive effect on the project. Furthermore, the action plans in the Norwegian scenario had high dominance of the public sector. They either lay the plans themselves or demand their inspection and prior approval. The finding is noted that the action plan as per technical solutions for the project could have been better suited and feasible had greater flexibility been given to the PPP company, as the public company could have opted out from the norms or solutions that fell out of its standards. The challenge of the rigid mechanism for public planning in all stages of PPP having adverse effect on innovative capabilities and appropriate transfer of risk has been gathered. Planning process in both countries is unnecessarily long and lethargic demanding ample time and effort of public and private party. Lengthy
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planning duration and long channels for their validation was a problem noticed in PPP models of both countries. This problem made it difficult to address the changes that could happen in the external environment in due course of planning. Addressing the administrative control exercised in M7 project, there seemed to be satisfaction in the needs mentioned by Malmi and Brown for management control. However, in Norwegian context, administrative control wasn’t found to be dominant as it ought to be. It was deduced that the road projects being the first attempt of Norway in practicing PPP could be attributable to this cause. To achieve maximum benefit from PPP model, Norwegian PPP model had to be more lenient in governance during design phase to promote innovation. The Norwegian public entity had reserved most of the risk to itself than leveraging the benefit of risk transfer offered by PPP.
Developing a control mechanism that links high risk with appealing incentives for private party might let the Norwegian PPP to make the most out of this kind of partnership. In addition, clan and symbols, the measure of cultural controls was found to not be clearly defined in both the PPP models.
Limitations
This study is exclusively based on data made available to public by Government of Norway and Australia. As the parameters for assessment were not well-defined distinguishing of some of the control mechanisms were based on subjective views.
The availability of the performance reports of the ongoing project could have contributed to wider understanding during analysis.
Scope for future studies
With the limitation observed and the ideas experienced from the learning and its practical implication, the need of a deeper study is evident. Abundant samples and interviews with key persons to have information which has not been recorded in documents meant for public could give insightful knowledge. The need of identifying control that could have been being led by private sector rather than by public sector for achieving the goals set by public party could be helpful. A development of a
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framework to link every management control mechanism with the result to know how each element influences the behavior in a PPP setting would contribute to the process.
Suggestively, the study has only incorporated two PPP models whereas there are various. So, future studies could recommend applications on MCs on various partnership settings and their effect.
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